Multiple Of Earnings Vs. Revenue

September 6, 2019 |  

About this episode


Glenn Grant always assumed he would sell his company for a multiple of EBITDA… until private equity firms started talking multiples of revenue. He decided to learn more.

To read a transcript of this episode, click here.

Glenn Grant started G2 Technology Group which was in the business of helping website developers host their sites with Amazon Web Services (AWS).

By 2018, Grant had built his company to 30 employees and was planning to grow further by acquisition. That was around the same time he began fielding calls from Private Equity Groups (PEGs), interested in buying G2. The PEGs were throwing around valuation multiples of revenue instead of EBITDA. Grant decided to switch strategies and instead of being an acquirer, agreed to be acquired.

In this episode, you’ll learn:

  • The difference between and a financial and strategic private equity group
  • How stock appreciation rights are different than options
  • Why your company’s culture impacts its value
  • How reputational equity as a channel partner can boost your value
  • How the sales process differs from an auction (and why in many cases its better)

Grant made an important strategic change early in his business from offering generic IT services to inventing a category of his own called “Managed Dev Ops”. Being the only player in his newly created category gave him the differentiation and pricing authority – two essential drivers of the value for any business. Have you figured out your own “category of one”? If not, let us help you by completing The Monopoly Control exercise – which is module 6 in The Value Builder System™. Get started for free right now by completing module 1.

About Our Guest

Glenn founded Boston-based managed services provider G2 Tech Group, a next-generation MSP linking managed DevOps services to cloud computing. Upon successfully exiting to Great Hill Partners in 2018, G2 merged into Mission Cloud Services where Glenn currently holds the position of President, US East. Glenn is an active member-leader in the Entrepreneurs' Organization currently overseeing EO Boston’s Accelerator program, which focuses on enabling first-stage entrepreneurs to break through the US$1 million revenue ceiling while obtaining the tools to become a better entrepreneur and leader.


John Warrillow:                I’m always crapping on private equity groups. Telling you that they’re the worst people to sell your company to. Well that’s not true, of course. They are great private equity groups out there, and today’s episode is one of those acquisitions stories. Glenn Grant sold G2 Technology Group to Great Hail Partners, and had a great experience selling to a private equity group. One of the things that I love about this story is, Glenn does a great job of distinguishing between a private equity group that’s acting like a traditional PE firm, where they’re simply essentially buying some EBITDA and trying to squeeze out some more profit before flipping your company.

John Warrillow:                And what is increasingly becoming a strategic private equity group, where there’s a strategic roll-up in place, or a way that they’re acting almost more like a strategic acquirer, as opposed to a financial buyer. And Great Hail in its acquisition of G2, really defines that. So, have a listen, and in your own mind Glenn will help you just distinguish between the two. Because I think a strategic private equity group could be a tremendous acquisition acquirer for your company. Glenn does some interesting things around transparency, and in particular he chose to be really transparent with his employees about selling his company.

John Warrillow:                That’s another thing that he did a little differently than we traditionally recommend, but have a listen to the way he did it, and incentivized each of his employees to make sure they had a little skin in the game leading up to an exit. He also talks about stock appreciation rights, and the difference between stock options and that might also be helpful for you if you’re thinking about including your employees in the sale of your company. Here to tell you all of the rest of the details is, Glenn Grant. Glenn Grant, welcome to Built To Sell Radio.

Glenn Grant:                     Thank you. Happy to be here. Big fan.

John Warrillow:                Tell us where you are, right now.

Glenn Grant:                     I am sitting in New Hampshire, at my new lake house. Enjoying the view.

John Warrillow:                And before we hit record you shared with me the lake house is a what?

Glenn Grant:                     It’s a trophy of mine, and I think it’s pretty interesting given the show. It’s a full circle, straight out of the book.

John Warrillow:                That’s awesome. That’s awesome. I’m a huge believer in having a trophy, by the way. Of when you sell your company. There’s got to be some way to market, so good for you. And every time you go to New Hampshire you can remember the success you had with G2. Tell me about this business. How did it start? In the beginning, for the first three years you guys did IT services? Describe that, if you would.

Glenn Grant:                     That’s correct. Yeah, so I was part of a different company that came to an exit, and I stuck around with the acquirer for a couple years. And then I decided I want to go venture out on my own. Really focused on company culture, and the composition of clients. So I decided to go out on my own and start a business that I knew how. Which was Managed IT Services. It wasn’t because that’s what I set out to do some ground breaking thing. It’s the trade I knew, and I decided, “Hey, I could do it myself.”

John Warrillow:                So IT services is like, you’re the IT guy for small businesses, when they need antivirus software, they call you? And networking computers together, that kind of stuff?

Glenn Grant:                     Exactly. I started off with help desk service support, monitoring, those types of things for a small-medium business between probably 20 and maybe 150 users.

John Warrillow:                Got it. You made a big pivot away from that. Maybe describe where you took the business from there?

Glenn Grant:                     Yeah, so started the business. Continue to operate it. I ended up joining entrepreneurs organization accelerator program, where I started to learn about what I was actually trying to pull off. And started to focus in on what I was doing. The first business book I ever read was Built To Sell.

John Warrillow:                Oh, boy.

Glenn Grant:                     Yeah. So, at first it started with trying not to be everything to everyone, and focusing on what we were doing. And then a little bit along the way, I actually wrote another book, Blue Ocean Strategy, and that got my mind going on, “I’m in IT services. There’s tens of thousands of IT companies just like me. What are we doing that’s different? And what can we do that’s even more different than that?” To sort of get away from the pack. With our sales team, cold calling. Our target customers gets 25 calls from IT services a month, right? So how to get into a different space.

Glenn Grant:                     At the time … In the industry, the cloud was starting to become the biggest buzz word around. And then actually developed into something beyond a buzz word. And I started working a lot with Amazon Web Services for my own use, backend in the business. And then that platform developed to a point where I was comfortable introducing it to customer environments. And as time went on we started to see that we were servicing a different segment of customers that was a little bit more high tech because of our location, and the Innovation District in Boston. So we sort of tuned in on that, and really started doing Linux Managed Services on the cloud, and then the next thing-

John Warrillow:                That’s when you lose me, by the way.

Glenn Grant:                     … Oh, yeah, yeah. It’s not important.

John Warrillow:                So you’re basically taking somebody’s website, and ensuring it’s being hosted on Amazon Web Services, AWS platform. Am I getting that roughly right?

Glenn Grant:                     Exactly. And basic … And we started to work with more Software as a Service companies, just because of the way that the industry was going, and it was around the neighborhood.

John Warrillow:                Got it. Okay. And that’s where you started to really differentiate. Where did you take it from there?

Glenn Grant:                     So, really what we did was we took it to, what we invented, if you will. We call it, Managed DevOps. And that was really looking at our customers, and how they viewed us. And then IT, managed IT business, we were essentially viewed as a cost center by the CFO, typically. We help somebody fix their printer off hours, they get a bill. Yeah, that’s important to them, but the bill they want to question. We started to pivot towards taking care of the customers’ revenue stream. So the SaaS platform. So now you fixed their SaaS platform in the middle of the night on Saturday. They’re giving you high fives, they don’t care about the bill because they didn’t have a blip in their revenue. And they don’t have customers calling them being upset because they were down.

Glenn Grant:                     So we intentionally tried to shift to that and away from being viewed as that cost center. And within the customers, we also switched our target audience. Which we basically serve the back office staff, and in our customers prior to that, the software developers making the SaaS platform, didn’t really want anything to do with us. We weren’t helpful to them, they could fix their own printers. And we were probably just a nuisance. So that’s what we started to pivot to Manage DevOps. And in a nut shell, that is getting into supporting the tool sets and the platforms that the developers actually use to make their product. And the software developers came our core target market for delivering service within these businesses.

John Warrillow:                Got it. So how did you charge for those services? What was your … Is it …

Glenn Grant:                     So, prior to in managed IT, we were charging per user. In the Managed DevOps, it was a lot of iterations, to be honest with you. But we basically charged a flat monthly fee. And we wanted to get into the realm of space where we were going to be able to deliver a certain amount of proactive service to help them build things, but then also sort of function as an insurance policy for when things go bump in the night.

John Warrillow:                Interesting. What did you learn about pricing as a result of your experiments?

Glenn Grant:                     Early on we had some accounts that were way underpriced. We had some accounts that were probably overpriced. At that time it was new, and there was nobody out there doing it. So we just charged what we charged. And our customers were around for quite a long time. So as time went on, we actually reduced the price for some customers as we gained leverage within our own operation. And we renewed our service packages, and had new pricing models. When we have a long-term customer they’re really happy to hear that we’re actually going to charge them less this year, but we’re going to deliver service in a different way that’s better for us.

John Warrillow:                Got it. I love, one of the nine subscription models is like the insurance policy idea, where you’re kind of paying a fee so that when things break you’re there for them, essentially.

Glenn Grant:                     Yeah, and in Managed IT, at that point in time that’s where the market was. It was almost all insurance policy, if you will. The more things we prevent from happening, more profitable we are. And the customer’s happy. As we started to get into the cloud and Managed DevOps, we really had to develop a way to bake into that package. A way for new things to be built. Because that was the whole beauty of the cloud, right? We can build things and spin-up servers with a couple clicks. And we didn’t want to be a bottleneck in that process. We really wanted to help, so it was sort of a reboot on the fixed monthly fee for IT services.

John Warrillow:                How big did you get the company before you decided to sell it?

Glenn Grant:                     We were around 30 people or so. And we used a number of outsourced providers for office type things. Accounting, bookkeeping, HR. So we kind of kept the footprint pretty small, as far as full-time employees.

John Warrillow:                How did it feel to be managing 30 people, both directly and indirectly?

Glenn Grant:                     It was a lot of work, but it was a lot of fun. I’m a big culture guy, and also type of leader where I’ll carry that weight on their shoulders, myself. Get on the front lines with people. So I really had a lot of fun, but you keep adding more people, and people are complicated. So, the more staff you add, the more things you’ve got to manage and juggle.

John Warrillow:                What was the trigger that made you want to sell?

Glenn Grant:                     So that was really interesting. In my business plan … So, I used EOS traction, and we have our quarterly meetings, and annual strategy sessions, and we’re always looking at that one year, three year bed. We made it a five year vision, because we’re in technology. A 10 year vision’s kind of irrelevant, right? And in our plan, we were headed towards building our own platform, if you will.

Glenn Grant:                     So I wanted to make a couple of acquisitions, and prove to a buyer that, “Hey, we have this platform. We’ve made a couple of add-on’s. And now we want to go to that next level and we need capital to do that.” So that was the plan we were tracking on, and really what happened was with the economy being as it was, and all this money that needed to be put to work, the private equity space figured out that this public cloud thing was good to go. And they started really knocking on everybody’s door about two years sooner than I had planned. Actually probably about three or four years earlier.

John Warrillow:                So let me just stop you there, Glenn. You had, in your plan, you had the idea that you were going to raise some money in order to make some acquisitions?

Glenn Grant:                     Oh, we were going to bootstrap and make some acquisitions. But then ship them to a buyer that this model, if we were to be bought or raise more money, that we could continue to make more acquisitions and really scale up. So I was working on proof of concept of that model, if you will.

John Warrillow:                And, Glenn, what was driving you to grow? You know, 30 employees, you’re a culture guy, you had a unique proposition. Why not kind of put your feet up and kind of ride it out for the next 10 or 15 years, take the dividends’ profitability? What was driving you to continue to grow and scale?

Glenn Grant:                     Really, it was the tech industry. Basically have to reinvent yourself. You know what I like to say, every seven years. Some people say you have to reinvent yourself every seven months, these days. But that’s a lot of work. It’s exhausting. It was exhausting to pivot from managed IT for small business to what ended up being managed DevOps, because you got to figure it all out again. You got to re-tool. You got to get different skillsets. And really, I just didn’t want to go through that again. So we got on the front edge of the wave with what we were doing, and I really wanted to ride that as fast as we could to that peak before whatever comes after the cloud comes, and we have to start all over again.

John Warrillow:                Yeah, that’s one of the downsides of being in the technology space, right? Great multiples, fast growth, lots of innovation. But man, the hunter can become the hunted pretty quickly.

Glenn Grant:                     Yeah. And in the M&A conversation too, that’s kind of how I felt . I wasn’t ready to sell, but I could tell from the activity in the market, someone was going to buy somebody in my neighborhood. And then I’d have an 800-pound gorilla with plenty of capital behind them, right in my backyard. And at the time we still really had no competition. People would say, “Who’s your biggest competitor?” And I would say, “The internal hire. Full-time employee.” Whereas in managed IT, I could rattle off 25 people that I know, that I’m friends with in EO that are just in Boston that are in the business.

John Warrillow:                Right, right, right. So-

Glenn Grant:                     I wanted to get moving with that before it got even more difficult.

John Warrillow:                Yeah, yeah, yeah. So what was your next step? So your triggering events. You’re starting to hear about private equity, and them being interested in companies like yours.

Glenn Grant:                     Yeah, I mean I was fielding an unbelievable amount of inbound inquiries for years. And I would take a look at those. And the quality of people reaching out started to get better and better, and bigger and bigger. It wasn’t just a … There was a whole lot of brokers I’d never heard of trying to be able to work with me and help me sell, and then it really started to develop into serious buyers that I was more interested in hitching my wagon to.

John Warrillow:                What did they say in their outreach that made you realize they were serious buyers?

Glenn Grant:                     You know it was interesting being in business and trying to be my own sale manager, which is my Achilles heel, which was one of the other driving factors. I’ve tried so many times to be a great sales manager, and it’s the thing that I’m the least good at. So in that regard, I would every now and then answer a cold call, kind of just to have some fun and see what the person on the other end would say. And kind of as in a good mood and enjoy that call, and see what was up. So I started actually doing that with these M&A inquiries. And this one time I picked up the phone and it wasn’t anybody that I ended up working with but they started talking about other deals in the market. And they were throwing out numbers that were more multiples of revenue, as opposed to multiples of EBITDA. And I was like, “Oh, it’s time to ask my board of advisors about this, and really take a serious look at what’s going on out there.”

John Warrillow:                What kind of multiples of revenue were they throwing out in those conversations? Was it like two and three times revenue?

Glenn Grant:                     Yeah. I mean, I’ve heard everything from one to half times revenue, to five times revenue if everything falls into place. And five times is … I haven’t met anybody who actually got that, personally. And I’m sure it had a lot of strings attached. You know size and scale was far beyond my business, as far as revenue and then EBITDA as well. Because I was trying to scale and grow, I was reinvesting most everything into the company on the fly. So I didn’t really fall into that category because I put the profit back into the engine.

John Warrillow:                How much of your net worth, at this time, when you were starting to field these calls, how much of your net worth is tied in your company on a percentage basis?

Glenn Grant:                     98%.

John Warrillow:                Wow. Like a huge proportion.

Glenn Grant:                     Yeah, yeah. I was definitely running the tables. And you got to know when to fold them. So-

John Warrillow:                Was that part of your calculus that you were so heavily exposed to …

Glenn Grant:                     … Yeah, definitely. And it really goes right back into having that having to reinvent your business every seven years in IT. And also with the economy, the economy’s been great. And at the time I was thinking, it had been too great for too long. And so that’s the other trigger too. If the economy goes down, then I’m going to have to hold onto this business for another seven to ten years, and wait for it to come back up if I’m looking for a real successful exit.

John Warrillow:                Yeah, yeah, yeah. For sure, I think once bitten twice shy. The people that have gone through, whatever it was, called the great recession, have no interest in doing that again.

Glenn Grant:                     No. And that’s when I started my business was right at the beginning of that, in January 2009.

John Warrillow:                Oh, is that right?

Glenn Grant:                     So it was all uphill from there.

John Warrillow:                I was just … You can only go up from there.

Glenn Grant:                     Yeah.

John Warrillow:                So okay. So you’re hearing these kind of multiple of revenue type conversations from private equity groups. Where do you go from there? How did you proactively start marketing your company for sale?

Glenn Grant:                     So, I took a different approach. Well first I did an outreach. Asked some advisors. Got some names of folks … Talked to investment bankers, and brokers. And I had some advice from some other folks where you could do the deal yourself with a lawyer who’s well versed in M&A. But then you need to do a lot of negotiating yourself. And knowing myself pretty well personally, I didn’t want to be in that position. I definitely wanted an insulator there.

John Warrillow:                Why?

Glenn Grant:                     Just because I wear my heart on my sleeve. I’m a real emotional guy, and I didn’t want to get drawn into any sort of-

John Warrillow:                Emotion to it. Yeah.

Glenn Grant:                     … and just negotiations. So, I had to a small board of advisors that I’d been working with. And a friend and colleague of mine, Matt Rumnick, he had experience in the private equity world. So we started talking about that level. He was actually in between gigs at the time. So I actually made the decision to hire him on full-time as a VP of Corp Dev. And what we were doing there was also following the sage advice of continuing to run the business as if a deal isn’t going to be done. So Matt was focused on both looking for small companies for us to acquire, while at the same time starting to vet some of these potential buyers. So we were really running a dual pronged approach where it gave us the flexibility to go either way. And we didn’t really put all of our eggs in one basket and then get near the end and have to, got to go with it or you got to start all over again.

John Warrillow:                Yeah, yeah. So, Matt’s kind of on the payroll now. Where does it go from there?

Glenn Grant:                     So, from there we had some inbound inquiries that the conversation got started a little faster than I wanted to. But it was also very interesting. So we pumped the brakes a little bit there. And we ran what we call a, limited process. So instead of going on a full blown auction, we already were talking to a few people. We knew they would be highly likely to be final contestants, if you will. And Matt’s advice there, if you go and run a full blown process right now, it might be a turn off to them, plus it’s going to take a lot more time. So we ran a limited process so that we had options.

Glenn Grant:                     If we went down the road with somebody and it didn’t work out. And also just to do a quick market check and not go by the one number somebody threw out there. But really get a feel for what people value the company at. Because it is a new business model, right? Managed DevOps, not a lot of people out there doing it. Also, with the Amazon partner network, we got in that very early. So we already have five plus years under our belt as being an Amazon partner. And in that space the channel is very important so we had built up a lot of clout with Amazon as a trusted partner, do good work, and that’s something that was also very interesting to perspective buyers.

John Warrillow:                Interesting. So where does it go from there? Matt’s got some offers. Did he actually get some letters of intent, or …

Glenn Grant:                     Yeah. So I mean the simplest cut to it, we talked to a number of people. We had quite a few in our data room. Our goal was to get a minimum of three letters of intent, and then move forward.

John Warrillow:                How did you pick that as a goal? What was magic about three?

Glenn Grant:                     It’s just one more than two. You don’t want to only have two people. So we wanted to get three. Gives you a pretty good idea of … If we got three solid LOIs, we could kind of trust that the numbers and the terms that we were looking at were going to be what we would probably see across the market.

John Warrillow:                Got it. So what’d you see … Did you get your three LOIs? And what did you see?

Glenn Grant:                     Yeah. Yeah. We did. We saw some good stuff in there. You know I really can’t get into the details of what exactly we saw, but one of those we decided to move forward with in a exclusive fashion. And start the wonderful process of diligence.

John Warrillow:                We’ll get into that in a second. So, the three LOIs, were they all from private equity? Or were there some strategic …

Glenn Grant:                     You know, I think there was one strategic in there. We did talk to a couple strategics. I always thought that I would sell my company to a strategic, if you had asked me years ago, even probably four years ago. I would say, “You’ll never see me sell to private equity.” Because of some stories I’ve heard in the entrepreneur circle. It just didn’t seem right for me. I heard things about the long grueling earn-outs and this, and that, and the other thing. But that’s not what I saw. That’s not what was being offered to us, and I had really never dug into private equity and the differentiation between firms. So the firms we were looking at were more on the gross partner side of the scale, as opposed to really just trying to build up your EBITDA and turn out some profit, and continue to grow, and then exit out. So, I didn’t know those existed. So they became unicorns to me, and I was pretty excited to see that. There was an opportunity there.

John Warrillow:                So let me get into … So in your mind, private equity groups, were really just there to ratchet up the EBITDA using lots of debt and management principles. And then kind of flip the company a few years later.

Glenn Grant:                     In my mind it was that the industry was really focused on the spreadsheets, and the dollars, and the business sense around that. And like I said, I was reinvesting all the profit back into the business. So I never thought that I would be attractive to anybody in that space.

John Warrillow:                Got it. So what did you come to learn as you evaluated these letters of intent from private equity companies? How did your perception of them change?

Glenn Grant:                     So, basically I learned that there was a few out there that had the same plan I did. They wanted to build a platform, but not to really just bolt on additional companies that were very similar, and increase that total revenue and EBITDA. But really truly scale up a platform that was unique in the market, and really get into a new space in technology. Almost behaving more like Venture Capital. Now I’m a dot com kid. Product of the dot com bubble burst, so VC totally out of the question for me. According to some of the dot coms’ I worked for, I’m a billionaire on paper, right? So, I wasn’t about to do that, but they funded the growth in that manner, but private equity’s out there looking for functioning businesses that were being run correctly, that were already proven and working. Whereas a lot of times you see in Venture Capital, it’s a very early stage idea, and they really want to help you figure it out and change it, make it their own thing.

John Warrillow:                What was it about, as you read through the letters of intent? And I know we can’t get into the specifics around numbers. What was the clue, or how did you know their intention was to build out a platform as opposed to just squeeze out more EBITDA?

Glenn Grant:                     It really wasn’t from the LOIs themselves. I went out and met with a bunch of the groups. Had dinners, talked about it, learned about their firm, their philosophy. Some of them had already owned companies in the space, and they were looking for more of an add-on. I also through rapidly learning about the process, it’d be better to be the first company that’s bought, or one of the first for a variety of reasons. Not only financially, but that you build and what your company does, and that cultures going to become a cornerstone of the bigger entity.

John Warrillow:                Sorry to cut you off … How were you … How was your role being characterized in those letters of intent? Was there this earn-out component where you were being asked to stay on? How did you stick handle the period after?

Glenn Grant:                     Yeah, so it wasn’t so much about earn-outs, which was surprising to me. It was about staying on but being part of that next chapter. Really it was more about the second bite of the apple. Which I also never thought I’d be interested in. And the opportunity to roll some of the proceeds of the sale forward, as the incentive to stay on and help the company grow and be a subject matter expert. And be a part of that next thing for the second bite. And that was exciting for me. I’m an entrepreneur, that was doing entrepreneurial things at a scale that I didn’t think I would do.

John Warrillow:                Just for folks following along, the second bite of the apple is this overused expression among private equity groups that basically means that you sell part of your business, and then carry, or some of your equity goes into the new entity as a form of equity into this roll-up or growing company. So that’s what you’re referring to here. So you were selling, I’m assuming, the majority … Was it a majority recapitalization, meaning the majority of the company and then rolling some into …

Glenn Grant:                     They were all, from a structures point of view, they were all structured as selling 100% of the company, but then reinvesting proceeds in.

John Warrillow:                I see. I see. So … And again, if we get into areas you can’t talk about, I totally understand.

Glenn Grant:                     Yeah.

John Warrillow:                But I think people would want to know what portion of your proceeds would they be looking for you to roll in. And interestingly, is that flexible? Is that a point of negotiation? Or is it sort of, it’s this or it’s nothing?

Glenn Grant:                     So, yeah I can’t get into the specifics there. It definitely is flexible. And what I will say is, I invested enough for it to be interesting.

John Warrillow:                Okay.

Glenn Grant:                     While at the same time taking a good portion off the table and getting that 98% of my net worth migrated the other directions, as fast as I could.

John Warrillow:                Enough to buy a lake house in New Hampshire.

Glenn Grant:                     Exactly.

John Warrillow:                So, got it. So a couple questions around that. Because again, I think this is really important for entrepreneurs, how … And again, we can sort of park your transactions for a minute, and now let’s just talk generally about working with private equity companies regardless of which one, and so forth. How do you … And maybe we ask it this way. If a fellow EO member said, “Glenn, I’m thinking of doing a private equity deal. How do I ensure that the equity that I roll into the new deal … How do I assure I don’t get diluted or that I ensure that I have some sort of decision making … I’m not just along for the ride, and some sort of absentee owner?” What advice would you give to that guy or gal who’s thinking about doing a PE deal?

Glenn Grant:                     Yeah, so it’s hard to be in control of any dilution, right? It is what it is. I would say, if you can be in a role in the company where you think you can make an impact, that’s the best way to skirt that, if they grow really well and don’t need to raise a bunch of capital, then you won’t get diluted as much. But that was … The other part of your question, essentially is losing control, right? How can you be sure that you want to be part of …

Glenn Grant:                     Tie up some more money in something that you don’t ultimately have control over, that’s something that I was completely not comfortable with. And that’s why I’d always said the earn-out things were scary and then I would tell people, “Make sure.” But my advice would be to really look at the private equity firm, and their track record and what they have accomplished. Because they are a business, and that is their business model. And if they have a great record of success, you should look into that and see if that’s something that makes you feel more comfortable.

John Warrillow:                How did you evaluate the track record of the companies that were making an offer? What are you … Are you going on to their website? Talking to other entrepreneurs who have sold to them? What was your evaluation look like?

Glenn Grant:                     So, going on to their websites, for sure. But then talking to other folks in the industry. Matt did a great job. He was familiar with a lot of firms, and if he wasn’t familiar with them, he would call their associates in his network to learn more. And then there’s always the option to ask to speak to someone else in their portfolio who has had an exit. And hearing right from a fellow entrepreneur who’s made a decision to work with that firm.

John Warrillow:                So, you got three offers, is that right? Three LOIs?

Glenn Grant:                     Mm-hmm (affirmative).

John Warrillow:                What’s the percentage difference? And I know we can’t talk about the numbers. But I’d be curious to know range. How big a gap was there between the low end and the high end among those three? Are we talking big, like 10% or 50%? How big a gap? Or was it pretty close?

Glenn Grant:                     You know things were pretty close. And that was encouraging that we were getting the data points we needed from the limited process and not missing the boat by not running [inaudible 00:35:19].

John Warrillow:                And presumably it gives you confidence that you were getting pretty close to what the company was worth. If you got three offers and they were … I guess when you get three offers and they’re wildly different, you’re like, “Maybe if we get 10 offers, we’ll get even more variants.” But when you get three, you’re starting to get a sense that maybe there’s some …

Glenn Grant:                     Yeah.

John Warrillow:                You know you’re hovering around the answer.

Glenn Grant:                     You know I pick up a lot of one-liners and cliches in the EO circle, but here’s one that stuck with me which is, your company’s only worth what somebody’s willing to pay for it.

John Warrillow:                Yeah.

Glenn Grant:                     So, I looked at it that way. On paper … I’ve had other colleagues, and friends, and associates that have gotten offers, and are just absolutely convinced that their company’s worth far more than what those offers were. And it might be, but if you can’t find somebody to give you that money then it’s not actually worth anything.

John Warrillow:                It’s not actually an offer. Got it. So, you agree to go through with, or you accept, one of the three LOIs.

Glenn Grant:                     Yeah.

John Warrillow:                What was it about that LOI that made you choose them?

Glenn Grant:                     It was really about the firm. I ended up working with Great Hail Partners. They coincidentally were in Boston. I just really liked the folks that I interacted with there, the partners there. Looking at their portfolio, I saw that they were very successful in tech companies, and I was a tech company. So really, if anything, I fell in love with the firm and the idea of being able to work with them at a level that was much higher than the bootstrap little business that I put together.

John Warrillow:                So what was life like … So you agreed to stay on, in what capacity? As an advisor? As a CEO of your company? What was your role?

Glenn Grant:                     So, I’m the president of US East. I’m still currently with the company. It’s now called, Mission Cloud Services. And the Great Hail purchased three companies at roughly the same time. And the other two firms were also Amazon Advanced Consulting Partners. Similar businesses. They were both in the Los Angeles area. So they were also scaling nationally. We had a geography value in the whole game. So a lot of my role was really being that executive here in the Boston beachhead, because HQ was out in Los Angeles.

John Warrillow:                What’s been the most difficult of the transition, for you, from bootstrap entrepreneur who could make all his own decisions, to now being a divisional president within a larger company?

Glenn Grant:                     Yeah, I mean really the biggest challenge for me was slowing down, allowing myself to slow down and to not essentially carry the whole weight of the world on my shoulders. And understand there’s other people around to help. So for me, it was not so much an issue of control and being able to make my own decisions. It was actually trying to turn the engine down from 150% to even a hundred. And sort of re-acclimate into the world of being an employee and not an owner, where you take everything home with you every night. I was on 24/7 365, not from a workload thing, but from a responsibility.

Glenn Grant:                     My employees became my friends. Their families became my families, which is very important to me. And a lot of people relied on me for income, and stability. And I took that very seriously. So I was always on. Always thinking. And it’s been great to … once I was finally able to wind down a little bit, know that somebody else was there to do it, that there’s a bigger team. That I could actually really go on vacation and unplug. And I took a couple of vacations where I told everybody, “Hey, I’m not going to check email. Don’t bother me. But in case of emergency, call these three fellow EOers of mine if you really need some advice.” But now I can do that and not even have to think that way. Not worrying about it. Know that I have a bigger team of experienced leaders that can run stuff.

John Warrillow:                Good for you. It’s amazing. I’m glad you brought up your employees because we talked offline before we hit record here, that you chose to be totally transparent with your team. Maybe talk through that decision and what you mean by transparent with your employees as it relates to selling.

Glenn Grant:                     Yeah. So really it was something that I had learned from my previous job. And now a colleagues and a really good, good friend of mine, who is also with EO. His name’s Calvin Wilder. But the company I worked at previously, the thing that I took away from that whole experience that was really interesting was, from day one, even in the job interview, they were talking about selling the company one day. And then when the company was sold, I remember somebody, one of the other staff, coming up to me and being like, “Hey, you know we’re selling the company. What do you think? You generally might be against something like this.” And I was like, “Hey, they were upfront above the board 100% of the time. So, it should come to no surprise to you that they’re selling the company. And regardless if you like the situation or not, it’s not on them. They told you from day one.”

Glenn Grant:                     So I really took that approach as well. So I wasn’t 100% transparent on the whole process, but I was transparent with folks even in the interview process, “Hey, we are growing the company to sell it one day. And we have these incentive plans to make it worthwhile for you too.” And really get everyone else to wad into some element of the entrepreneurial ride. We wanted to hire entrepreneurial candidates that got that. Some got it a lot more than others. Some people that’s all they wanted was some sort of stake in it. Another folks that were, maybe earlier on in their career, you know we had to do some explaining like, “This is how it works. But if you want to go work for Fortune 50 company, maybe still get a pension. This is how the game’s played these days.”

John Warrillow:                So what was your currency to incentivize your team around the exit?

Glenn Grant:                     So we had stock appreciation rights.

John Warrillow:                Okay. Describe that. What does that mean?

Glenn Grant:                     So as I described it to candidates, we set aside a certain portion of the equity in the company for this program, and we awarded them to individuals as they came on, and also on an annual basis based on performance. And I went with stock appreciation rights because I had experienced that previously, but also going back to the dot com era, it was stock options, right? Where you have to … They vest over time. You actually got a pay for them, and I liked stock appreciation rights, because we weren’t asking the employees to actually pay for them.

Glenn Grant:                     You are awarded them at a certain stock price, depending on the valuation. Let’s say it was a dollar, and if the company sells, and the stock was worth $3, then you get the $2 from the time that it grew. And I’m not asking you to put any of your money in. I’m not asking you to work here because I was to take a portion of your paycheck. But I do want you to have a win to celebrate at the end. And also it functions as a retention tool for the payout schedule was post-sale. So that they were also along for the ride with me post-sale.

John Warrillow:                How did you value the company for the purposes of the stock appreciation rights?

Glenn Grant:                     So we did a valuation a couple of times. Yeah. But I really can’t get into specifics of that either, but-

John Warrillow:                Okay. Okay. No problem. But I’d be curious to know, did you use an external firm? Was it kind of back of the napkin? A formula that you’d heard. What was the …

Glenn Grant:                     Yeah. So I mean it basically evolved over time. It started with the back of the napkin you know, “Hey, they’re worth nothing. So lucky you. It’ll be worth something someday.”

John Warrillow:                Yeah, yeah.

Glenn Grant:                     And then as time went on, I think we essentially leveraged our CPA firm. And as things got bigger and more serious, then we started to do more formal valuation. So it was kind of a gradual build there of … You know it’s a trade-off, right? The valuation process is expensive, and at early stage you don’t really have the money for it. But on the other hand, your stock’s not really worth a tremendous amount, so it’s kind of easy to do the napkin method.

John Warrillow:                Yeah, yeah, yeah. How did you … Let me ask you a different way. What advice would you have to a fellow entrepreneur who is considering putting in a stock appreciation rights program?

Glenn Grant:                     So, those types of tools and the whole subject of, “Do I tell my employees that we’re trying to sell the company? Or we’re going to sell the company? Or the company’s about to be sold?” Personally, I think it really comes down to a company culture thing. There isn’t a right or wrong culture out there, is what I believe. But there are plenty of different cultures. And for some of them, I think that type of program and transparency really just helps fuel the engine. And then other companies, it might not be that important, and it might actually cause more problems than it’s worth.

John Warrillow:                Yeah, I’ve heard all sorts of stories. Everything from, galvanized everybody, marching in the right direction on the good side, downside, creating all these fiefdoms and backtalk about, “What’s the stock work, and who we’re selling to.” And people are focused too much on exit, as opposed to serving customers and so forth. Kind of herd the gamut.

Glenn Grant:                     Yeah. And I think that’s really a factor of culture. And probably industry, as well. I’d imagine if you were in the financial industry, then everybody would be in tuned to what those numbers were and when it was going to happen. But we were tech folks. We’re just computer geeks. We’re really excited to fix computers-

John Warrillow:                Your words, not mine.

Glenn Grant:                     … help people out. Yeah, totally. We were there to help our customers achieve their goals. And we’re very customer service focused. And that was the type of business we had. We were a services business.

John Warrillow:                How big … You know I think people would be curious to know, how much money the rank and file employee got as a part of the exit. Now I know we can’t answer that directly, but I’d be curious was it like 5% of an annual salary, 50, 100%? Was it a meaningful amount of money? Or was it more, if you will, token amount of money that wouldn’t … Do you know what I’m getting at? I’m trying to …

Glenn Grant:                     Yeah.

John Warrillow:                I would be curious to know how much money do I have to put in the game here to have a material impact for my employees?

Glenn Grant:                     Yeah, I mean again, I can’t really talk about that. But I can talk about me. I wanted it to be meaningful, and it was meaningful.

John Warrillow:                Yeah, yeah, yeah, yeah. Okay. That’s helpful, for sure. Last question. You mentioned there were trophies purchased. Plural. One of which we already talked about. But I’d be curious to know the other ones. What were the other trophy’s bought?

Glenn Grant:                     Yeah, the other trophy was a toy that I’d been looking at for a long time. It’s calls a Onewheel. It’s like an electric skateboard.

John Warrillow:                Oh, yeah. I’ve seen those.

Glenn Grant:                     Oh, yeah. So there’s nothing that says, cool, like a 40-year-old tech dude riding around on an electric unicycle, right? But I was looking at it forever, and seriously after the closing in the middle of the day. Which wasn’t what you’d see in the movies, so dramatic. But I did finally go into that shopping cart and hit buy, right away.

John Warrillow:                Nice.

Glenn Grant:                     That was my gift to myself. And then of course we mentioned that my family and I we bought a lake house. And yeah, it’s a great retreat. And ironically, totally unintentionally, but it’s kind of out of your book, right? Now I’m the mentor and the coach sitting up here in my office at the lake house. As opposed to the other way around.

John Warrillow:                That’s awesome. That’s awesome. Well I’m glad it’s worked out so well for you. If you … Where should people reach out, if people want to reach out on social media. Is there a website that you want people to go to?

Glenn Grant:                     Yeah.

John Warrillow:                If people want to say, “Hi.” What’s the best way to do that?

Glenn Grant:                     Yeah, you can definitely hit me up on LinkedIn. Otherwise, you can email me at Glenn … With two Ns

John Warrillow:       Hey man, it was great to meet you. And a pleasure to chat with you about your business. Thanks for joining.

Glenn Grant:                     Great to meet you too. Thanks a lot.


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